UK: Liens On Sub-Hire Under Standard Form NYPE 1946: Not Permitted

Last Updated: 5 December 2012
Article by Ed Mills-Webb and Chris Moxon

The New York Produce Exchange (NYPE) 1946 time charterparty form remains highly popular in bulk shipping. Following the High Court's decision in Dry Bulk Handy Holding Inc & another v Fayette International Holdings Ltd & another [2012] EWHC 2107 (Comm) ("BULK CHILE"), however, it is now clear that one of the key weapons in the owners' armoury when dealing with unpaid hire – namely the exercise of a lien on sub-hire – is unavailable on the standard wording of NYPE 1946.

Background

Clause 18 of the standard form NYPE 1946 stipulates that "the Owners shall have a lien upon all cargoes, and all sub-freights for any amounts due under this Charter". If the charterers' obligation to pay hire is as set out in clause 5 of the standard form, payment must be made by the charterers to the owners "semi-monthly in advance" – and if it is not so paid, the hire becomes an "amount due under this Charter", triggering the provisions of clause 18.

In those circumstances, the owners would be entitled to exercise a lien upon "all cargoes, and all sub-freights" for the hire due. This means that, rather than (or in addition to) persevering with their attempts to obtain hire from the charterers, the owners can insist that a voyage charterer that has contracted with the charterers must pay any freight owing under that voyage charter to the owners, rather than to the charterers.

The question that arises is this: what if the sub-charterers' contract with the charterers is a time charter, rather than a voyage charter? The amounts due under the sub-time charter will be sub-hire, not sub-freight, so can the lien over sub-freights permitted by clause 18 of NYPE 1946 be deemed to cover sub-hire?

This was one of the questions tackled by the High Court in "BULK CHILE".

Facts

The "BULK CHILE" was subject to a chain of three charters (between the owners (A) and charterers (B); the charterers (B) and sub-charterers (C); and the sub-charterers (C) and sub-sub-charterers (D)). The head charter (between A and B) was a time charter; the charter in the middle of the chain (between B and C) was a 'trip' time charter; and the charter at the end of the chain (between C and D) was a voyage charter. The two time charters in the chain were on the NYPE 1946 form.

A large amount of hire became outstanding under the head charter. Owners (A) invoked clause 18 and attempted to exercise a lien over sub-hire by sending a notice of lien to C. At the same time, A also attempted to exercise a lien over sub-sub-freight by sending a notice of lien to D.

C voiced concern to A about the validity of the notice of lien, and suggested that the parties set up an escrow account into which the sub-hire owed by C could be paid while the parties sorted out to whom the sub-hire should be paid. A rejected this proposal, and the matter proceeded to litigation.

The decision

The Judge held that A's arguments in favour of a lien over sub-hire had "considerable force", but ultimately felt bound to follow an earlier High Court decision on the same topic, namely the 1990 decision in "CEBU No.2". The Judge held, somewhat reluctantly, that the term "sub-freights" in clause 18 of the NYPE 1946 form could not be stretched to encompass sub-hire. Accordingly, A had no valid lien over sub-hire owed by C, but did have a valid lien over sub-sub-freight owed by D.

One of the main pillars of the decision in "CEBU No.2" was that, while the term "freight" had been used in the context of time charters well into the twentieth century, there had been a change in the use of the term "freight" in more recent times, such that it was no longer used to refer to hire payable under a time charter. The fact that many provisions of the NYPE 1946 form contained the term "hire" meant that the extension of the term "subfreights" in clause 18 to cover sub-hire would be a step too far. In other words, if clause 18 had been intended to cover sub-hire, it would have said so.

The decision in "CEBU No.2" had conflicted with an earlier High Court decision on very similar facts ("CEBU No.1"), so, up until the decision in "BULK CHILE", it was a matter for debate as to whether or not a lien on sub-hire under the standard form NYPE 1946 was possible. In following "CEBU No.2", the Judge in "BULK CHILE" has, subject to appeal, confirmed that a lien on sub-hire would not be possible under the standard form NYPE 1946.

Analysis

The decision has helped clarify an important issue, and although it has confirmed the limitations of clause 18 of NYPE 1946, the lien on sub-freights remains a powerful tool available to owners. The decision has, however, left other issues unresolved, including the potential impact of having differently worded lien clauses or conflicting jurisdiction provisions in the charterparties that constitute the chain.

For example, what would be the result if a lien clause in the charter between A and B permitted a lien over sub-hire but the lien clause in the charter between B and C did not permit any such lien? Would A be entitled to a lien over sub-hire owed by C to B, or could C successfully argue that no such lien should be recognised? Similarly, if the law and jurisdiction clause in the charter between B and C was different from that in the charter between A and B, could C succeed in arguing that any decision as to a lien on sub-hire owed by C to B would have to take place according to the law, and in the jurisdiction, agreed between B and C? In "BULK CHILE", the relevant charters had the same law and jurisdiction clauses and similar rights of lien, with the result that these further issues present, perhaps, some potential for debate in future cases.

An appeal from the decision in "BULK CHILE" is currently listed to be heard by the Court of Appeal in February 2013. Any developments regarding the issue of liens on sub-hire will be considered in a future update.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.